MercoPress. South Atlantic News Agency

Petrobras told to control costs of its massive investment program

Mantega trying to keep Petrobras distant from political influence

Petrobras oil and gas corporation needs to control costs in its investment program, Brazil's Finance minister said on Monday, days after he and other board members told the company to revise an update of its 224 billion US dollars spending plan.

“It is necessary to develop certain points, adjust time frames and to seek lower costs” said Finance minister Guido Mantega who is also and chair of Petrobras' board, without providing further details. “The five-year plan is discussed exhaustively until it is satisfactory”.

Last Friday the corporation’s executives were asked for “sensitivity studies,” or evaluations of how the plan's goals will change under different economic circumstances. It was the second time in just over a month the board delayed approving the 2011-2015 investment plan.

The 2010 to 2014 investment version is already the world's largest corporate investment program and if completed Petrobras may surpass Exxon Mobil Corp as the world largest publicly traded oil company.

The Brazilian government wants to make sure Petrobras exploration and development program expands at the same pace as the country's oil-services sector, which under Brazil's local content rules will provide most of drilling rigs, platforms and pipelines needed for the corporation’s offshore campaign.

But the corporation has also been exposed to political pressure from lawmakers and governors regarding any changes to existing investment plans.

“No value for the plan has yet been established”, Mantega said. Under the existing plan, Petrobras expects to boost output more than 40% by 2014 by tapping the vast deep-water sub-salt reserves off Brazil's southeast coast near Rio de Janeiro.

Investors worry that an overly ambitious investment plan may force Petrobras either to sell new stock or borrow heavily, diluting existing shareholders or increasing its debt load to a point that threatens its investment-grade credit rating.